FED holds rates as US Bull run continues
US index markets continued their biggest month of gains on Wednesday, as news from the FED and tech earnings boosted economic hopes. To begin with the 2PM EST announcement from the FED where they stated that they will continue to keep rates unchanged sent stocks into a frenzy. This news came as the US GDP saw the world’s biggest economy shirk by 4.8%.
Although the FED warned that there could be lasting impacts on the economy in the medium term, the short term impact on markets has so far not relayed that message, as Indices continued their month long rally.
So what is the FEDs position?
The FED who cut rates twice in the month of March, from 0.75% – 0.25% , stated it will not make any decision to revisit the possibility of increasing rates until the economy is back on track. In regards to this point the FOMC stated, “ The committee will closely monitor market conditions and is prepared to adjust its plans as appropriate”.
Following the rate cuts in March, and historical stimulus packages, the chairman of the FED, Jerome Powell stated that the support for the economy will remain, and all available resources will be explored in helping to propel the economy.
In continuing with this tone , he reiterated yesterday that, “The Federal Reserve is committed to using its full range of tools to support the US economy in this challenging time,”
Although adding that “The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
What else happened yesterday?
In addition to the FED’S announcement, yesterday saw the continuation of Q1 earnings season, with several tech titans all posting significant growth numbers. The big headline came from Facebook, who reported revenue of $17.74 billion. This news saw shares in the tech giant climb by as much as 10% in out of hours trading.
The company also reported that average revenue per user was at $6.95, up from $6.25 at the same period last year. This came as lockdown measures globally, has led to engagement in Facebook owned platforms to increase, as many attempt to connect with loved ones.
Regarding the pandemic, Facebook CEO Mark Zuckerburg said, “ While there are massive societal costs from the current shelter-in-place restrictions, I worry that re-opening certain places too quickly before inaction rates have been reduced to very minimal levels will almost guarantee future outbreaks and worse longer-term health and economic outcomes”
Microsoft also saw a 15% jump in stock, whilst Twitter and Tesla also reported better than expected jumps in revenue.